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The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.
“A slower housing market is not surprising in a month containing both a federal election and an interest rate hike,” added Mr Devitt.
“Despite the decline in May, sales of new homes in the first five months of the year remain very strong.
“Ongoing increases in interest rates are expected to bring this boom cycle to an end. Households’ capacity to borrow will begin to constrain as rates rise further.
“The impact of rising rates will be compounded by the ongoing increases in the cost of construction and land, forcing up the cost of a new house and land package.
“Consumer confidence has fallen in other economies where central banks have tightened lending. The same impact is likely to emerge in Australia in the coming months.
“However, the significant volume of work under construction and elevated levels of work approved but not yet commenced, will see a significant lag before the rise in the cash rate adversely impacts on the number of new homes commencing construction.
“The lag from when a rate rise results in a decline in starts can be as short as six months, but in this cycle, it could be more than 12 months before the volume of starts fall due to the rise in rates,” concluded Mr Devitt.
Queensland and South Australia saw the only increases in new home sales in May: up by 8.8 per cent and 12.0 per cent respectively. Victoria led the declines, down by 12.7 per cent, following by New South Wales (-12.2 per cent), and Western Australia (-0.8 per cent).
For the three months to May 2022, compared to the same quarter in 2019, sales in Queensland were up by 44.1 per cent, followed by New South Wales (+43.2 per cent), Western Australia (+21.0 per cent) and Victoria (+19.2 per cent). South Australia was the only state that was down over this period, down by 6.5 per cent.
"A slow return of overseas migration is easing the adverse impact of a loss of workers from Australia’s two largest states,” stated Tim Reardon, HIA’s Chief Economist.
The Victorian Government has announced a further lifting of COVID-19 restrictions in relation to vaccination requirements.
The Certificate of Occupancy requirements for Class 1 buildings were suspended on 16 December 2021 to run until 30 June 2022.
This infosheet provides an overview of what cost plus contracts are, how they are used and how to avoid common issues. HIA has a Tasmania Cost Plus Contract for sale available for purchase through Contracts Online.